A deceptively strong finish
Despite tariff concerns and persistent geopolitical tension, industrial manufacturing (IM) M&A in 2025 delivered a credible close: comparatively fewer deals, bigger checks, and deliberate portfolio moves. The fourth quarter capped a year defined by megadeals in logistics, grid-electrification plays, and defense-tech capabilities, even as financing and policy uncertainty kept some sponsors sidelined.1 Importantly, the LTM count of deals above $500 million expanded sharply, underscoring how not just value but the number of large-cap transactions accelerated to levels not seen in several years.
Q4’25 was a study in disciplined ambition. Total deal value of $156.0 billion was down 27.2 percent quarter-over-quarter (QoQ) but up meaningfully versus Q4’24, confirming the year’s pivot toward larger, more thesis-driven transactions. Total volume fell to 1,949 deals, as acquirers prioritized quality, scale, and cash-flow resilience over broad roll-ups. Strategic buyers dominated value, continuing the trend observed through Q3’25, when megadeals (most notably Union Pacific’s $85 billion merger with Norfolk Southern) reshaped the narrative around logistics and infrastructure platforms—even after adjusting for that outlier.2
Overall, Q4 wrapped up a decent year for dealmaking in IM—deal volume declined 3.4 percent year-over-year (YoY) to 8,528 deals from 8,831 in 2024, while deal value rose 90.0 percent YoY to $563.6 billion from $296.7 billion in 2024. Macro context remained complicated. Election-year tariff rhetoric and war-related supply chain risk injected volatility into diligence and valuation models, yet the steadier interest-rate backdrop cushioned financing costs enough to let well-capitalized buyers transact. Subsector dynamics diverged: diversified industrials and business services leaned into electrification, thermal management, and filtration scale-ups; aerospace and defense (A&D) turned to tech-integrated platforms, satellites, and high-power electronics; engineering, infrastructure, and construction (EIC) cooled after a datacenter-heavy Q3’25; transportation, logistics, and distribution (TLD) normalized post-rail megadeal peaks; and automotive activity concentrated in EV supply-chain control and software-defined services.
As 2026 begins, we expect acquirers to concentrate on scale assets that support energy transition and digital operational visibility, while using carve‑outs in A&D and EIC to sharpen strategic focus. Buyers will likely preserve flexibility in tariff‑sensitive sectors through earn‑outs and other contingent mechanisms, even as they accelerate diligence around supply‑chain localization and AI‑enabled service models.
